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The real exchange rate of the dollar for a panel of OECD countries: Balassa-Samuelson or distribution sector effect?

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  • Camarero, Mariam

Abstract

The purpose of this paper is to analyse the role of productivity in the behaviour of the real exchange rate of the dollar against the currencies of a group of OECD countries. To do this, a general specification is tested, with particular attention being paid to the breakdown of the productivity variable into tradables, non-tradables and distribution sector productivity. The applied technique relies on the pool mean group estimation methodology proposed by Pesaran et al. [Pesaran, M.H., Shin, Y., Smith, R.P., 1999. Pooled mean group estimation of dynamic heterogeneous panels, Journal of the American Statistical Association 94 (446), 621-634] to obtain error correction models in panels without imposing equal long-run and short-run parameters. The results point to the relevance of differences in the distribution sector productivity for the real exchange rate, especially in those countries that belong to the European Union. These results are in accordance with New Open Economy Macroeconomics models predictions as far as the role of both distribution sector productivity and fiscal expenditure on the real exchange rate are concerned. Journal of Comparative Economics 36 (4) (2008) 620-632.

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  • Camarero, Mariam, 2008. "The real exchange rate of the dollar for a panel of OECD countries: Balassa-Samuelson or distribution sector effect?," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 620-632, December.
    • Handle: RePEc:eee:jcecon:v:36:y:2008:i:4:p:620-632
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    Cited by:

    1. Fernando Alexandre & Pedro Bação, 2012. "Portugal before and after the European Union: Facts on Nontradables," NIPE Working Papers 15/2012, NIPE - Universidade do Minho.
    2. Wang, Weiguo & Xue, Jing & Du, Chonghua, 2016. "The Balassa–Samuelson hypothesis in the developed and developing countries revisited," Economics Letters, Elsevier, vol. 146(C), pages 33-38.
    3. Works, Richard & Haan, Perry, 2017. "An Empirical Study of Japanese and South Korean Exchange Rates Using the Sticky-Price Monetary Theory," MPRA Paper 77235, University Library of Munich, Germany.
    4. Lopcu, Kenan & Dülger, Fikret & Burgaç, Almıla, 2013. "Relative productivity increases and the appreciation of the Turkish lira," Economic Modelling, Elsevier, vol. 35(C), pages 614-621.
    5. Cushman, David O. & Michael, Nils, 2011. "Nonlinear trends in real exchange rates: A panel unit root test approach," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1619-1637.
    6. Works, Richard Floyd, 2016. "Econometric modeling of exchange rate determinants by market classification: An empirical analysis of Japan and South Korea using the sticky-price monetary theory," MPRA Paper 76382, University Library of Munich, Germany.
    7. Ghosh, Saurabh & Nath, Siddhartha & Srivastava, Sauhard, 2021. "Productivity and Real Exchange Rates for India: Does Balassa-Samuelson Effect Explain?," MPRA Paper 110913, University Library of Munich, Germany.

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    More about this item

    Keywords

    Real exchange rates Productivity Cointegration Panel Distribution sector;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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